India's Cash Paradox: Digital Payments Surge Amid Stagnant Cash Demand

India's central bank now has 176 billion banknotes in circulation.

The Reserve Bank of India (RBI) prints 28-30 billion fresh notes annually and retires roughly 21 billion. This is a vast logistics operation.

Cash continues to thrive despite digital payments growth, with the RBI calling it the 'cash paradox'. Currency in circulation grows at double-digit rates even as cash's share of individual transactions declines.

Shirish Chandra Murmu, RBI deputy governor, said that future demand is harder to predict due to this combination, complicating production and distribution planning.

The cash stockpile is driven by lower-value notes, with 56 billion US dollar bills and 30 billion euro banknotes in circulation at the end of last year. This is partly because digital payments alone cannot tell the whole story of cash demand.

Apps are replacing only one function of cash: as a means of payment. Cash still serves three purposes - it's also a store of value and a hedge against calamity.